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American Economic History: Econ 113: September 24, 2007 Lecture Headings

Economic History Seminar Liveblogging

Chris Meissner, U.C. Davis: Trade Costs in the First Wave of Globalization

David Jacks, Chris Meissner, and Dennis Novy (2007), "Trade Costs in the First Wave of Globalization" (Davis, CA: U.C. Davis)


Chris Meissner: freshly arrived at U.C. Davis from the University of Cambridge:

Meissner: Good to be back in California. Some things have not changed. Glad to see that Brad is still blogging...

Meissner: I read it six times a day. My chance of appearing in it has just gone out the winow...

Meissner: What drove the global trade boom 1870-1913? Falling trade costs or economic expansion? Global trade costs fell by 10-15% between 1870-1913. Explain 45% of the global trade boom...

Meissner: Shipping costs fall by 50%. But trade costs include a lot more...

Meissner: Internal distribution costs--wholesale and retail--are here classified as trade costs...

Meissner: Cairncrossd (2001), James (2001), "All of the commodity market integration in the Atlantic economy after the 1860s was due to the fall in transport costs between markets..." (O'Rourke and Williamson, 1999). All. We disagree...

Meissner: They look at price gaps. We look at levels. We will talk about why that gives you a different answer...

Meissner: Monopolistic competition model with consumers who love variety. Trade extent determined by differences in Ricardian technologies and by levels of trade costs. Iceberg trade costs. Gravity model of trade flows. Take the gravity equation and invert it to turn it into a trade cost equation--if you know parameter s, the share of goods that are tradable, and rho, the elasticity of substitution. Rho is eleven: a markup over marginal cost of 10%. s is 0.8: 80% of goods are tradable.

Meissner: Trade costs equal to 1 - ((export share)/(tradables share))^(markup)

DeLong: Meissner's "trade costs" are thus a nonlinear transformation of export shares. And actual international transport costs

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